American-Qatar Air Clash Spurs Codeshare Demise, CEO Apology

The feud between American Airlines Group Inc and Qatar Airways Ltd keeps escalating.

First, American scoffed at the Mideast airline’s interest in buying as much as 10 percent of the US company. That prompted Qatar Airways Chief Executive Officer Akbar Al Baker to say his counterpart at American, Doug Parker, was “frightened” by the proposed investment.

Then Al Baker found himself in the hot seat this week after disparaging US flight attendants as “grandmothers” and boasting that his own cabin crews had an average age of 26. He apologised Wednesday after a rebuke by trade unions and American, which called the remarks “both sexist and ageist.”

The latest casualty is a marketing deal between the two companies, known as a codeshare, which American now says it will end because of a longstanding dispute over whether Persian Gulf carriers use government subsidies to compete unfairly. The US company privately notified Qatar Airways of the decision on June 29 - a week after disclosing the Mideast airline’s overture to potentially become one of American’s largest shareholders.

“They definitely are trying to send a message to Qatar that they don’t want Qatar involved in American,” said George Hamlin, president of Hamlin Transportation Consulting.

'Illegal subsidies'

American said it would also end a marketing agreement with Etihad Airways PJSC. The end of the codeshare deals won’t have a significant financial impact, American said in an emailed statement.

“The codesharing relationships between American and these carriers no longer make sense to us,” the Fort Worth, Texas-based company said. The decision “is an extension of our stance against illegal subsidies these carriers receive from their governments.”

Etihad said it was “disappointed” with American’s exit from the codeshare pact and rejected allegations it violated any air-transportation agreements.

“We view the decision by American Airlines as being anti-competitive and anti-consumer,” Abu Dhabi-based Etihad said in an emailed statement. “This action will reduce choices for consumers and may result in higher fares for travelers to and from the United States.”

Qatar Airways didn’t immediately respond to requests for comment.

Qatar Airways withdrew and refiled on Monday a regulatory document about its plan to acquire American Airlines shares, the US carrier said Wednesday. The proposed investment would not change American’s “board, governance, management or strategic direction,” the airline said.

“American Airlines continues to believe that the president and his administration will stand up to foreign governments to end massive carrier subsidies that threaten the US aviation industry and that threatens American jobs,” the company said in a filing.

Subsidy dispute

American has led calls from US carriers for talks on whether government subsidies have enabled the three biggest Persian Gulf operators - Qatar Airways, Etihad and Emirates - to become global players.

The Mideast majors say they’ve benefited from no more than seed capital many years ago and have become dominant thanks to a strategy of exploiting the Gulf’s position at a natural global crossroads to carve off a significant share of the most lucrative long-haul transfer traffic.

The Persian Gulf airlines are also known for quality: Qatar Airways reclaimed the No. 1 spot in this year’s Skytrax awards, a coveted list of the leading 100 airlines. No US companies ranked in the Top 20.

The Qatar Airways CEO said his remarks were made at “a time of strong rivalry” with the US airlines.

“Cabin crew are the public face of all airlines, and I greatly respect their hard work and professionalism,” he said in an emailed statement. “They play a huge role in the safety and comfort of passengers, irrespective of their age or gender or familial status.”

He also wrote a personal apology to Sara Nelson, president of the Association of Flight Attendants-CWA, which represents 50,000 workers at 20 US airlines. While accepting his apology, Nelson responded that Al Baker’s “offensive comments and the subsidies your airline receives perhaps indicate a belief that you can operate outside of rules and norms.”

Ownership stakes

Qatar Airways and American are partners in the Oneworld global alliance and each counts British Airways as its closest global partner. Qatar Airways owns a 20 percent stake in BA parent IAG SA. But the Mideast company’s planned investment in American still came as a surprise given tensions between the two.

The purchase of a major stake in American would mark a fourth foray into overseas ownership for Qatar Airways following its IAG deal; the acquisition of a 10 percent holding in Latam Airlines Group SA, the biggest South American carrier; and a planned 49 percent stake in minor Italian operator Meridiana SpA.